ADDRESS 


OF 

MR.  THEODORE  P.  SHONTS 

BEFORE  THE 

THIRD  ANNUAL  CONVENTION 

OF  THE 

Lakes-to-the-Gulf  Deep  Waterway 

Association 


AT  CHICAGO,  ILLINOIS 


OCTOBER  9,  1908. 


3  r  k 

Svn 


The  Future  of  Rail  and  Water  Trans¬ 
portation  in  the  United  States. 


It  is  a  great  pleasure  to  be  here  today  and  I  am  glad 
of  the  opportunity  to  give  you  my  views  on  a  subject  in 
which  we  are  all  deeply  interested — The  Future  of  Rail 
and  Water  Transportation  in  the  United  States. 

I  am  no  recent  convert  to  the  Deep  Waterway  Cause. 
I  have  believed  in  it  and  favored  it  from  the  first. 
When  I  had  the  pleasure  of  addressing  the  Chicago  Com¬ 
mercial  Club  nearly  two  years  ago,  I  urged  that  the  enter¬ 
prise  be  given  greater  attention  because  of  the  changing 
conditions,  due  to  the  construction  of  the  Panama  Canal. 

The  widening  and  deepening  of  the  waterway  built  by 
nature  between  the  Lakes  and  the  Gulf  has  long  since 
ceased  to  be  a  local  or  sectional  question.  It  has  become 
a  matter  of  national,  and  in  fact  international,  importance 
on  account  of  the  effect  which  it  promises  to  have  on  our 
commerce  with  other  countries:'  is  therefore  entitled  to  the 
active  support  of  every  patriotic  American.  Not  satisfied 
with  being  the  granary  of  the  world,  the  United  States 
has  recently  undertaken  to  become  its  workshop.  Great 
as  has  been  our  gain  in  population,  we  have  grown  more 
rapidly  in  the  production  of  manufactures  and  if  we  are 
to  continue  to  advance  we  will  be  compelled  to  engage  in 
the  wars  which  are  to  come — wars  not  for  the 
acquisition  of  territory,  but  to  secure  supremacy 
in  international  commerce.  The  country  which  has  the 


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best  transportation  facilities  will  have  a  distinct  advan¬ 
tage  in  such  contests  and  the  completion  of  the  waterway 
in  which  you  are  interested  will  go  far  towards  giving 
this  country  that  advantage.  The  construction  of  a  great 
inland  harbor  reaching  from  the  Gulf  to  the  Great  Lakes 
will  not  only  develop  the  whole  Mississippi  Valley  until  it 
becomes  as  great  in  manufacture  as  it  is  in  agriculture, 
but  it  will  aid  in  the  further  progress  of  the  entire  na¬ 
tion. 

With  the  completion  of  its  sister  enterprise,  the  Pan¬ 
ama  Canal,  the  markets  of  Central  and  South  America, 
which  have  been  too  long  overlooked,  will  be  brought  to 
the  very  heart  of  our  country.  Ships  will  be  able  to  load 
in  Chicago,  St.  Louis,  New  Orleans,  or  intermediate 
points  and  deliver  the  cargo  along  both  coasts  of  Central 
and  South  America  without  breaking  bulk  before  vessels 
from  European  countries  have  more  than  fairly  started 
on  their  journey.  Nature  and  the  Monroe  Doctrine  have 
given  us  an  advantage  in  these  markets  which  the  people 
there  appreciate.  We  should  therefore  avail  ourselves  of 
their  friendly  disposition  before  the  merchants  of  Europe, 
who  also  recognize  the  situation  and  are  seeking  to  coun¬ 
teract  our  advantages  by  extending  and  cementing  their 
relations  with  these  countries,  become  so  firmly  en¬ 
trenched  that  it  will  require  great  effort  to  drive  them  out 
and  secure  that  share  of  the  trade  which  properly  should 
be  ours. 

I  think  I  fairly  represent  the  general  sentiment  of  their 
officers  when  I  say  that  the  Railroads  of  the  country  do 
not  look  upon  your  enterprise  with  unfriendly  eyes.  I 
know  that,  as  President  of  The  Chicago  &  Alton  Rail¬ 
road,  one  of  whose  main  lines  reaching  from  Chicago  to 


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St.  Louis  will  be  paralleled  its  entire  distance  by  the  con¬ 
struction  of  your  deep  waterway,  I  can  truthfully  say  that 
our  Company  will  cordially  welcome  the  early  completion 
of  your  great  undertaking.  I  favor  it  and  we  all  favor 
it  because  we  realize  that  this  work  when  finished  will 
make  it  possible,  as  nothing  else  short  of  the  expenditure 
of  appalling  sums  of  money  could,  for  us  to  handle  the 
commerce  which  is  certain  to  follow  the  return  and  firm 
establishment  of  national  prosperity. 

The  greatest  obstacle  that  steam  railroads  have  to  over¬ 
come  if  they  are  permitted  to  operate  and  expand  as  the 
traffic  of  the  country  grows,  is  the  providing  of  adequate 
terminals.  It  is  an  easy  matter  to  lay  rails  between  im¬ 
portant  centers  and  to  run  trains  over  them.  The  diffi¬ 
culty  is  to  provide  terminals  sufficiently  large  to  permit 
the  expeditious  disposition  of  the  traffic  at  terminal  points. 
The  growth  of  great  cities  and  the  consequent  enormous 
increase  in  real  estate  values  have  made  terminal  prop¬ 
erty,  to  the  extent  that  conditions  demand,  almost  pro¬ 
hibitive,  so  that  only  the  very  richest  railroads,  and  those 
whose  credit  is  most  firmly  established,  can  hope  to  pro¬ 
vide  adequate  facilities  and  reasonable  conveniences  for 
the  public.  In  New  York,  Boston,  Philadelphia,  and 
Baltimore  the  situation  in  this  respect  has  become  so 
serious  that  the  bulk  of  the  grain  business  has  been 
driven  to  Canadian  ports  where  land  is  cheaper  and 
facilities  can  be  provided  at  more  reasonable  expense. 
The  fact  is,  this  problem  has  attained  such  magnitude 
that  some  profound  students  of  transportation  affairs  are 
already  discussing  the  feasibility  of  having  the  Govern¬ 
ment  provide  the  terminal  facilties  for  the  railroads  of 
the  country  in  order  to  protect  American  commerce — but 


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this  is  the  solution  least  to  be  desired  because  it  would  be 
the  first  actual  step  towards  Government  ownership  of 
railroads. 

The  opening  of  this  waterway,  however,  would  greatly 
aid  in  the  solution  of  this  question  because  every  point 
of  the  thousand  mile  harbor,  stretching  from  Chicago  to 
New  Orleans  would  be  accessible  and  feasible  for  the  con¬ 
struction  of  great  terminal  facilities  so  that  the  trunk 
lines  of  the  East  and  West  could  converge  and  inter¬ 
change  their  traffic  and  load  into  ships  which  would  serve 
Europe,  Mexico,  and  the  Central  American  States,  the 
East  Coast  of  South  America  and,  through  the  Panama 
Canal,  when  it  is  completed,  the  West  Coast  of  North 
and  South  America  and  the  Far  East.  It  will  give  the 
Mississippi  Valley — the  vast  territory  between  the  Rock¬ 
ies  and  the  Alleghenies — a  system  of  outlets  for  its  prod¬ 
ucts  that  ought  to  take  care  of  the  future  needs  for  cen¬ 
turies  to  come.  It  will  not  injure  the  cities  and  seaports 
which  are  now  the  gateways  of  our  export  trade,  nor  will 
it  affect  the  railroads  in  any  other  way  than  to  aid  them 
in  developing  the  country.  The  effect  of  the  Erie  Canal 
and  other  waterways  has  not  been  to  compete  with  the 
railroads  but  to  supplement  them  and  the  Deep  Waterway 
will  be  the  greatest  achievement  in  this  direction  which 
has  ever  been  accomplished.  With  a  population  of  ninety 
millions  the  railroads  now  have  all  the  business  they  can 
well  handle  under  normal  conditions.  It  is  at  times, 
chiefly  on  account  of  the  congestion  at  terminals,  almost 
impossible  for  them  to  transport  the  traffic  that  comes  to 
them  without  delays  which  may  well  cause  complaint  from 
the  shipper.  With  this  condition  prevailing  in  times  of 
ordinary  prosperity,  what  will  the  situation  be  when  our 


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population  is  doubled?  The  situation  as  it  now  stands  is 
serious.  However,  the  construction  of  this  Deep  Water¬ 
way,  by  furnishing  an  easy  outlet  for  the  present  and 
prospective  products  of  the  great  Middle  West  will  re¬ 
move  the  danger  which  now  threatens  of  a  traffic  conges¬ 
tion  that  would  affect  practically  every  industry  in  the 
land. 

The  history  of  transportation  by  rail  and  water  in  the 
United  States  shows  that  the  traffic  created  by  the  rail¬ 
roads  has  grown  more  rapidly  than  it  has  been  possible 
to  extend  the  lines  of  transportation  on  land,  and  that 
because  of  the  governing  conditions  the  railroads  have  - 
absorbed  the  higher  class  of  freight,  while  the  cheaper 
classes  which  could  bear  only  a  low  tariff  have  been  turned 
over  to  the  canals.  This  cheaper  class  of  freight  while  not 
in  itself  profitable  to  the  railroads  must  be  transported  to 
aid  in  the  development  of  communities  and  industries, 
which,  in  turn,  will  produce  an  increased  higher  grade 
tonnage  for  the  railroads.  For  instance,  the  construction 
of  this  canal  will  convert  Kansas  into'  a  great  cement¬ 
making  State.  That  State  has  great  beds  of  rock  that 
make  first  class  cement  but,  on  account  of  the  long  rail¬ 
road  haul  and  the  fact  that  cement  is  a  cheap  product 
which  cannot  stand  railroad  charges  for  any  considerable 
distance  this  industry  has  never  been  developed  to  any¬ 
thing  like  its  fullest  extent. 

In  the  construction  of  the  Panama  Canal,  as  I  happen 
to  know  from  personal  experience,  the  cement  makers  of 
Kansas  were  unable  to  successfully  compete  with  the 
manufacturers  in  the  East  who  were  close  to  the  seaboard 
and  those  of  Europe,  who  were  similarly  situated.  With 
the  completion  of  this  Deep  Waterway,  however,  Kansas 


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will  be  able  profitably  to'  market  millions  of  tons  of  ce¬ 
ment  where  it  now  sells  only  hundreds  of  tons.  The 
railroads  will  not  profit  materially  by  the  short  haul  to  the 
canal,  but  the  building  up  of  the  cement-making  industry 
will  encourage  a  vast  line  of  other  industries  which  will 
furnish  high  class  and  remunerative  traffic  to  the  rail¬ 
roads.  This  is  only  one  illustration  of  the  manner  in 
which  canals  not  only  aid  the  railroads,  but  assist  in  the 
development  of  the  whole  country.  There  will  always  be 
a  large  tonnage  which  the  railroads  cannot  handle  so  far 
as  the  long  haul  is  concerned  at  sufficiently  low  cost  to 
enable  the  industries  to*  thrive,  and,  on  the  other  hand, 
there  will  be,  in  normal  times,  enough  traffic  which  de¬ 
mands  quicker  service  and  can  afford  to  pay  more  remu¬ 
nerative  rates  to  keep  the  land  lines  of  transportation 
busy. 

The  steam  railroad  is,  and  from  the  nature  of  things 
must  always  be  the  backbone  of  all  transportation.  It  is 
the  growth  of  the  steam  railroad  that  has  made  possible 
the  marvelous  development  of  our  country.  The  canal 
aids  the  railroad  in  our  national  development,  but  it  can¬ 
not  alone  carry  the  burdens  of  commerce.  The  railroads 
carry  traffic  to  the  canals  and  haul  it  away  from  them. 

.  If  there  is  no  freight  for  the  railroads  to  carry,  the  bosoms 
of  the  canals  will  be  unruffled.  It  is  impossible  therefore, 
to  strike  a  blow  at  the  railroads  without  hitting  the  canals, 
and,  to  go  further  with  a  plain  statement  of  fact  without 
making  the  impact  felt  to  the  uttermost  limits  of  the 
nation. 

What  is  the  situation  today  respecting  our  American 
railroads?  Are  these  great  arteries  of  trade  whose  con¬ 
struction  originally  made  possible  the  development  of  our 


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inland  commerce  in  position  to  respond  to  the  increasing 
demands  which  are  continually  being  made  upon  them? 
Is  this  most  representative  of  all  American  industries, 
which  normally  gives  direct  employment  to  1,600,000 
men,  and  indirectly  gives  employment  to  as  many  more 
through  the  industrial  concerns  which  have  no  market 
except  the  railroads — is  this  industry,  which,  in  normal 
times,  purchases  itself  25%  of  all  the  manufactured  prod¬ 
ucts  of  our  country,  and  handles  every  day  almost  every 
item  which  enters  into  the  daily  life  of  our  ninety  millions 
of  citizens,  now  in  condition  to  properly  perform  the  serv¬ 
ice  necessary  to  insure  our  country’s  further  growth? 
Does  the  daring  spirit  which  inspired  our  pioneer  railroad 
builders,  the  spirit  which  assumed  the  risk,  conceived  the 
processes,  and  defied  the  obstacles  which  beset  the  laying 
of  the  wire  across  the  sea  and  the  rail  across  the  plains 
still  exist?  Have  we  as  much  of  that  alert,  re¬ 
sourceful  and  self-confident  individualism,  which  has  been 
our  greatest  national  asset  today  as  formerly?  Do  the 
coffers  of  the  2,000,000  American  investors  in  American 
railroad  securities  open  as  readily  as  in  the  past  to  provide 
the  funds  necessary  to  keep  our  railroad  development 
abreast  of  our  traffic  requirements  ?  You  gentlemen  who 
are  all  deeply  interested  in  the  transportation  affairs  of 
the  nation  and  are  consequently  familiar  with  the  true 
situation,  at  once  answer  “No”  to  each  of  the  questions 
just  propounded.  But  what  is  the  reason  for  all  this? 
What  is  it  that  has  taken  the  heart  out  of  our  Railroad 
Managers — that  has  chilled  their  laudable  ambitions,  that 
has  frightened  away  our  financial  support,  that  has  shad¬ 
owed  our  horizon  on  every  side,  that  has  made  us  cease  to 
act,  and  only  wait?  The  answer  is  clear — it  is  the  fear  of 


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Government  operation  of  our  roads  through  Commissions 
who  have  ik>  financial  responsibility,  is  the  thing  which 
has  produced  these  results.  The  idea  of  operation  through 
Commissions  is  the  illogical  outcome  of  public  measures 
at  first  preventive  and  justified,  but  which,  with  the  swing 
of  the  pendulum,  have  become  a  dangerous  interference 
in  matters  which  have  their  private  as  well  as  public  con¬ 
cern  and  which,  if  extended  and  continued,  will  portend 
disaster.  And  so  I  beg  leave  this  morning  before  this 
audience  of  competent  judges  to  state  the  case,  as  a  busi¬ 
ness  man  talking  to  business  men,  or,  better  still,  as  an 
American  citizen  talking  to  his  fellow  citizens, — to  state 
the  case  calmly  and  dispassionately  in  behalf  of  the  com¬ 
mercial  independence  of  our  American  railroads. 

I  think  we  will  all  agree  that  our  future  as  a  nation 
depends  more  than  any  other  one  thing  on  the  character, 
extent  and  cost  of  the  service  our  transportation  lines 
render  and  that  we  have  already  shown  that  the  interests 
of  the  rail  and  water  lines  are  inseparably  linked  together 
so  that  whatever  injures  the  one  will  to  a  greater  or  less 
extent  cripple  the  other. 

The  railroads  were  built  and  developed  by  men  who 
had  a  high  order  of  courage,  wisdom  and  faith,  but  who 
were,  after  all,  men.  Until  earth  becomes  Paradise  per¬ 
fection  will  not  dwell  in  man,  so-  it  is  not  surprising  that 
the  work  of  these  men,  while  splendid  from  many  points 
of  view  and  unparalleled  in  the  history  of  human  en¬ 
deavor,  was  not  perfect.  Selfishness  crept  in  and  grew 
and  avarice  sometimes  overcame  conscience.  Then,  too, 
conditions  changed  and  policies  which  seemed  wise  and 
just  in  order  to  encourage  the  development  of  a  new  coun¬ 
try,  and  without  which  great  stretches  of  virgin  soil  now 


i 


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peopled  and  prosperous  would  not  have  been  settled  in  a 
hundred  years,  became  questionable  after  the  newly 
opened  territory  became  self-sustaining. 

Without  any  desire  to  excuse  past  wrongs,  I  submit 
that,  when  you  consider  the  vast  interests  involved  and 
the  swiftness  of  their  development,  the  wonder  is  not  that 
evils  crept  into  the  railroad  business,  but  that  the  evils 
were  so  fewr.  Many  of  these  the  railroads  discovered  and 
corrected;  others  they  discovered  but  found  it  impossible 
under  the  then  existing  conditions  to  correct.  Take  the 
question  of  rebates,  for  example.  Do  you  suppose  that 
any  self-respecting  railroad  man  of  his  own  free  will  paid 
money  out  from  his  Company’s  treasury  to  secure  traffic 
to  which  he  was  rightfully  entitled?  He  did  it  because 
he  was  compelled  to  do  it,  or  lose  the  business.  The  traffic 
which  levied  tribute  in  this  way  became  so  tremendous 
and  the  system  so  widespread  that  legislation  was  re¬ 
quired  to  stop  the  payment  of  rebates.  New  laws  were 
required,  too,  to  put  an  end  to  all  forms  of  unjust  dis¬ 
crimination,  to  prevent  the  issue  of  fictitious  securities, 
to  standardize  accounts  and  to  compel  publicity — not  pub¬ 
licity  of  the  kind  to  satisfy  the  inquisitiveness  of  a  morbid 
curiosity,  and  which  will  entail  millions  of  useless  expense 
upon  the  corporations  if  allowed  to  stand — but  a  degree 
of  publicity  which  will  satisfy  stockholders  as  to  the  man¬ 
ner  in  which  their  properties  are  being  managed,  and 
enable  the  Government,  through  its  expert  accountants, 
to  make  it  certain  that  no  lawrs  are  being  violated.  Such 
law^s  either  have  been  or  should  be  enacted,  and  almost 
every  railroad  man  wall  not  only  welcome  them,  but  will 
co-operate  in  securing  their  adoption. 

But,  going  beyond  these  necessary  laws,  which  provide 


10 


for  wise  regulation,  the  idea  of  physical  operation  of  rail¬ 
roads  by  Commissions  has  come  into  being,  and  therein 
lies  the  greatest  danger  which  our  country  faces  today. 
The  danger  is  not  in  the  Commissions  as  they  are  now 
made  up  but  in  the  law  itself;  in  the  fear  on  the  part  of 
the  investors  in  railroad  securities  that  the  management 
of  their  properties  will  be  taken  out  of  the  trained  hands 
which  now  direct  them  and  placed  in  charge  of  men  who 
know  nothing  about  railroad  operation  and  have  no  finan¬ 
cial  responsibility  and  are  accountable  to  no  one  but  the 
man  who  appoints  them,  or  to  the  political  organization 
which  procures  their  appointment.  Railroads  have  no 
business  in  politics,  but  if  the  present  tendency  is  not 
checked  they  will  ultimately  be  thrown  intoi  the  hands  of 
politicians  and  become  their  prey. 

To  point  out  the  possibilities  of  plunder  through  the 
injection  of  politics  into  railroad  management  would  be 
to  digress  into  details.  It  is  the  principle  of  the  operation 
of  railroads  by  Commissions  which  we  are  all  interested 
in  just  now,  and  I  insist  that  it  is  a  grievous  and  vicious 
wrong,  that  it  amounts  in  the  end  to  confiscation  of  prop¬ 
erty  without  due  process  of  law  and  that  it  is  filled  not 
with  probabilities  but  with  certainties  of  evil  and  that  it 
is  wholly  un-American  and  a  violation  of  the  first  prin¬ 
ciples  of  free  Government.  There  are  two  fundamental 
features  which  must  not  be  lost  sight  of  in  the  discussion 
of  this  question,  and  the  first  is  the  human  phase.  What 
is  the  thing  which  has  made  our  nation  great?  Individual 
effort.  What  has  been  the  incentive  behind  this  individual 
effort?  The  hope  of  individual  reward.  In  no  field  of 
human  endeavor  has  this  hope  been  more  fully  realized 
than  in  the  railroad  field,  with  the  result  that  men  with 


11 


the  best  brain,  with  the  most  upright  character,  possess¬ 
ing  ceaseless  energy,  infectious  enthusiasm,  and  broadly 
constructive  faculties  have  been  attracted  thither.  Take 
away  responsibility  from  these  railroad  officers,  place 
them  where  they  can  neither  initiate  nor  carry  through 
what  they  do  initiate,  and  you  will  destroy  the  element 
which  has  made  the  railroads  and  the  United  States 
what  they  are  today. 

The  operation  of  our  railroads  has  become  so  complex 
that  it  presents  scientific  problems  more  difficult  of  solu¬ 
tion  than  those  of  any  manufacturing  concern — yet  men, 
born  full  fledged  over  night,  talk  glibly  of  the  most  diffi¬ 
cult  and  technical  railroad  problems  and  how  to  master 
them.  Who  would  think  of  operating  the  great  steel  works 
of  the  country,  or  any  other  line  of  industry  involving  less 
complicated  features,  through  Commissions?  Yet  the 
idea  is  just  as  rational  and  the  theory  contains  just  as 
much  of  right  as  does  the  operation  of  railroads  by  Com¬ 
missions.  I  do  not  claim  a  monopoly  of  brains  for  Amer¬ 
ican  railroad  managers,  but  they  have  in  fifty  years  con¬ 
structed  more  than  50%  of  the  railroad  mileage  of  the 
world;  they  are  giving  a  service  superior  to*  that  of  any 
other  country  at  from  one-half  to  one-third  the  cost,  and, 
while  doing  these  things,  they  have  paid  more  than  double 
the  wages  that  are  paid  anywhere  else  on  earth.  I  am 
willing  to  stand  on  that  record  and  let  the  people  decide, 
after  they  have  considered  it,  whether  it  is  safe  or  wise  to 
risk  a  change  and  to  legislate  away  the  very  foundations 
on  which  human  success  is  based. 

There  is  a  financial  as  well  as  a  human  side  to  the  ques¬ 
tion,  and  this  is  of  importance  to  you,  as  canal  builders, 
because  of  the  inter-relation  of  land  and  water  transpor- 


12 


tation.  Because  of  this  hostile  legislation,  national  and 
state,  and  the  consequent  fear  on  the  part  of  the  owners 
of  railroad  securities  that  they  will  not  be  allowed  to  man¬ 
age  their  own  properties,  the  railroad  development  of  the 
country,  which  should  now  be  making  great  strides,  while 
there  is  plenty  of  labor,  to  prepare  for  the  return  of  pros¬ 
perity,  is  at  a  complete  standstill,  with  distressing  effects 
which  are  felt  in  every  line  of  business.  I  think  you  all 
understand,  without  my  saying  it  here,  that  there  can  be 
no  return  of  prosperity  that  will  stay  with  us  until  the 
railroads  are  fairly  treated. 

We  have  in  New  York  State  today  practical  operation 
of  transportation  lines  by  Commission  and  I  find,  from 
speaking  on  the  same  subject  in  the  West  before,  that  it 
is  not  generally  understood  that  this  situation  really  exists 
as  an  actuality.  The  New  York  Public  Service  Law 
has  placed  its  Commissions  (we  have  two,  one  for  New 
York  City  and  one  for  the  rest  of  the  State)  practically 
in  the  shoes  of  the  Directors  of  the  railroad  corporations 
throughout  the  State  and  has  given  them  complete  control 
of  the  corporate  affairs.  The  Commissions  may  compel 
railroads  to  change  or  add  to  their  structures ;  to  change 
or  add  to  the  operations  of  trains;  to  change  their  rates, 
or  to  change  the  kind  and  quantity  of  rolling  stock ;  their 
terminal  facilities,  motive  power  or  any  other  property  or 
device  used.  State  regulation  under  such  a  statute  is  in 
effect  State  prohibition  of  new  enterprise  and  State  opera¬ 
tion  of  existing  railroads.  What  is  the  result?  Trans¬ 
portation  development  in  New  York  is  not  paralyzed — it 
is  dead.  This  is  not  because  of  anything  that  the  men 
who  now  constitute  these  Commissions  have  done;  they 
have  been  prudent,  careful,  and  honest,  but  the  menace  is 


13 


in  the  law.  We  do  not  know  who  the  next  Commission 
will  be  or  what  it  will  do.  Some  of  the  present  Commis¬ 
sioners  themselves,  have  talked  of  recommending  such  a 
change  in  the  Public  Service  Law  as  will  remove  those 
things  which  are  dangerous  and  which  act  as  an  effective 
barrier  to  further  development,  and  leave  in  the  law  only 
those  things  which  make  for  reasonable  regulation.  Until 
legitimate  regulation  is  substituted  for  the  physical  opera¬ 
tion  which  is  now  authorized  there  can  be  no  railroad 
progress  in  New  York  or  any  other  State  which  has 
analogous  laws.  Rather  than  see  this  anomalous  con¬ 
dition  become  general  and  permanent,  I,  as  a  railroad 
man,  would  prefer  Governmental  ownership  and  opera¬ 
tion  of  the  railroads,  dangerous  as  that  would  be  to  the 
maintenance  of  our  liberties,  because  operation  without 
ownership  not  only  destroys  the  initiative  by  destroying 
the  hope  of  reward  to  the  individual  officers  and  dries  up 
the  fountains  of  money  supply,  which  are  necessary  to 
keep  the  railroad  development  abreast  of  the  traffic  re¬ 
quirements,  but  also  because  of  the  fact  that  the  Com¬ 
missions  which  operate  the  railroads  have  no  financial  re¬ 
sponsibility  and  are  not  held  accountable  for  results. 
Therefore,  extravagance  and  graft  and  ruin  must  even¬ 
tually  ensue;  whereas,  if  the  Government  bought  the  rail¬ 
roads  and  paid  for  them,  it  would  of  necessity  be  respon¬ 
sible  to  the  people  for  a  fair  return  on  the  investment,  and, 
unless  our  whole  theory  of  government  should  prove  a 
failure,  it  would  have  to  hire  trained  men  to  operate 
the  properties  and  place  on  those  men  responsibility  for 
such  management  as  would  satisfy  the  people  that  the 
properties  were  efficiently  and  economically  administered. 

There  is  now  no  scarcity  of  money.  Millions  of  dollars 


14 


are  being  loaned  in  New  York  every  week  at  1  per  cent, 
but  none  of  it  is  going  into  railroad  securities  nor  for 
railroad  extensions,  nor  will  any  of  it  go  there  until  the 
holders  of  it  are  assured  of  a  fair  return  on  their  invest¬ 
ment  with  the  promise  that,  under  proper  regulations, 
they  will  be  allowed  to  manage  their  own  business.  In 
other  words,  the  commercial  independence  of  the  railroads 
•can  not  be  interfered  with  nor  any  of  the  technical 
details  of  operation  assumed  unless  the  vital  interests  of 
the  public  are  jeopardized. 

Do  not  misunderstand  me !  I  believe  in  supervision  or 
regulation  by  Commission.  I  think  that  the  welfare  of 
the  country  and  the  welfare  of  the  railroads  demand  the 
existence  of  such  bodies  and  that  they  be  clothed  with 
powers  sufficiently  broad  to  enable  them  to  effectually 
protect  the  public  welfare,  so1  that  nothing  I  say  herein  is 
a  reflection  on  the  doctrine  of  regulation  by  Commissions ; 
but,  as  I  have  said,  the  great  danger  lies  in  those  sections 
of  the  laws  which  go  beyond  the  point  of  regulation  and 
place  the  physical  operation  of  the  railroads  in  the  hands 
of  men,  who,  however  honest  and  high  minded  they  may 
be,  are  wholly  lacking  in  the  training  and  experience 
which  such  authority  demands. 

There  is  no  one  who  has  greater  confidence  than  I  in 
the  high  purpose  of  the  members  of  the  Interstate  Com¬ 
merce  Commission,  yet,  as  showing  the  effect  on  commerce 
of  untrained  men  when  they  go  too'  far  into  operating 
details,  it  may  not  be  out  of  place  to'  briefly  review  the 
two  most  important  acts  of  that  Commission.  Its  first 
important  order  relating  to  international  trade  required 
that  freight  rates  from  Asiatic  ports  to  inland  American 
points  should  be  published  for  thirty  days  before  they 


15 


went  into  effect.  When  a  shipper  in  Shanghai  or  Hong 
Kong  asked  for  a  rate  on  a  consignment  of  goods  to 
Chicago  or  St.  Louis  he  wanted  it  that  day ;  he  would  not 
wait  until  the  next  day  or  next  week,  and  certainly  not 
until  next  month.  The  effect  of  this  order  of  the  Com¬ 
mission,  in  place  of  widening  the  markets  of  the  world  to 
our  manufactures  and  thus  aiding  the  railroads  in  devel¬ 
oping  the  commerce  of  the  country  was  to  practically 
drive  American  ships  from  the  waters  of  the  Pacific  and 
to  drive  American  railroads  from  the  rapidly  growing 
markets  they  were  developing  and  serving. 

The  first  important  order  of  the  Interstate  Commerce 
Commission  having  to  do  with  the  making  of  domestic 
rates  directed  a  reduction  of  15  per  cent  in  the  rates  from 
the  Atlantic  seaboard  to>  Kansas  City.  Immediately  on 
the  issuance  of  this  order,  Chicago,  St.  Louis  and  other 
Mississippi  River  common  points  took  it  up  and  objected 
vigorously  to  having  the  seaboard  moved  15  per  cent 
nearer  to  Kansas  City  unless  they  received  a  propor¬ 
tionate  advantage.  The  next  development  was  the  dis¬ 
covery  that  the  State  of  Missouri  had  a  Railroad  Com¬ 
mission  of  its  own,  that  Kansas  City  and  St.  Louis  were 
both  in  Missouri  and  that  not  only  all  traffic  passing 
between  those  two  cities  locally,  but  also^  all  traffic  pass¬ 
ing  between  the  two  rivers  was  affected  by  the  orders 
of  the  Missouri  Commission.  This  Commission  said  to 
the  railroads:  “If  you  obey  the  order  of  the  Interstate 
Commerce  Commission  and  bring  the  Atlantic  seaboard 
15  per  cent  closer  to  Kansas  City,  thus  upsetting  the  geo¬ 
graphical  line  established  by  nature,  we  will  immediately 
order  a  15  per  cent  reduction  in  rates  between  St.  Louis 


16 


and  Kansas  City  so  as  to  keep  the  cities  relatively  where 
they  have  been  since  the  first  railroads  were  built.” 

This  fact  being  reported  to  the  Interstate  Commerce 
Commission,  that  body  informed  the  railroad  representa¬ 
tives  that  the  attitude  of  the  Missouri  Commission  was 
something  with  which  they  had  nothing  to  do,  and  that 
it  was  the  business  of  the  railroads  to  fight  it  out  with  the 
local  Commission,  adding  however,  that  if  the  Missouri 
Commission  carried  out  its  threat  and  reduced  the  rates 
between  St.  Louis  and  Kansas  City,  the  Interstate  Com¬ 
merce  Commission  would  again  reduce  the  rate  from  the 
seaboard  to  Kansas  City  by  15  per  cent.  Now,  what  will 
happen  ?  If  the  Interstate  Commerce  Commission  holds 
to  this  attitude  and  the  Missouri  Commission  stands  on 
its  rights  the  result  will  inevitably  be  that  every  line  east 
of  the  Missouri  River  will  be  forced  into  bankruptcy,  and 
in  the  last  analysis  the  rates  to  these  cities  will  be  rela¬ 
tively  where  they  are  today  because  they  are  now  based  on 
geographical  and  commercial  conditions,  which  always 
have  and  always  will  control  and  prescribe  them. 

The  truth  is  that  the  railroads  of  this  country  do1  not,  as 
a  matter  of  fact,  make  the  rates.  They  are  permitted  to 
promulgate  them  but  the  rates  to  and  between  commu¬ 
nities  are  established  by  the  commercial  interests  of  those 
communities,  which  are  constantly  watching  to  see  that 
no  other  community  secures  an  advantage  over  them  in 
the  matter  of  freight  tariffs. 

If  this  country  is  to  continue  to  grow,  transportation 
development  must  at  least  keep  abreast  of  our  industrial 
progress,  and  transportation  by  water  cannot  be  wisely 
extended  except  as  transportation  by  land  advances.  No 
way  has  been  discovered  of  building  real  railroads  except 


IT 


with  money,  and  money  will  not  go  into  railroad  construc¬ 
tion  at  the  behest  of  legislation,  nor  from  patriotic  or 
political  promptings  nor  for  any  other  reason  than  that 
it  is  a  secure  interest  bearing  investment.  If  the  invest¬ 
ment  is  not  attractive  the  money  will  go  elsewhere,  into 
fields  where  it  will  be  welcomed  and  not  interfered  with. 
The  solution  of  the  problem  of  continuing  railroad  devel¬ 
opment  and  creating  additional  facilities  which  should 
now  be  under  active  construction  therefore  rests  in  giving 
the  railroads  a  square  deal.  That  means  a  prohibition 
of  all  rate  discrimination  but  full  and  complete  author- 
ity  to  fix  their  own  rates  ,  and  thus  obtain,  under  nor¬ 
mal  conditions,  a  fair  return  on  the  investment.  It  also 
means  the  right  under  proper  regulation  to  operate  their 
own  properties.  That  is  all  that  is  needed  but  that  is  ab¬ 
solutely  essential. 

The  trend  of  thought  of  those  who  have  studied  the 
question  closely  and  dispassionately  favors  the  repeal  of 
those  laws  which  go  into  the  scientific  details  of  manage¬ 
ment  in  providing  for  railroad  operation  by  Commission 
and  a  return  to  the  policy  of  a  sane  regulation  of  the 
transportation  lines.  There  need  be  no  fear  that  rates 
will  be  too  high  or  that  they  will  be  so  adjusted  as  to  work 
any  injustices  if  they  are  fixed  by  trained  and  experienced 
men.  Railroad  men  well  understand  that  their  properties 
can  prosper  only  when  the  communities  they  serve  are 
prosperous. 

Railroads  are  not  entitled  to  an  unreasonable  profit,  but 
they  are  entitled  to  a  reasonable  return  for  the  service 
they  render.  The  law  of  service  and  compensation,  as 
regards  the  railroads,  is  as  inexorable  as  the  law  of  supply 
and  demand.  When  good  citizens  buy  silk,  they  expect  to 


18 


pay  silk  prices.  If  yon  insist  on  getting  silk  for  calico 
prices  and,  through  threats  of  Congressional  or  legislative 
influence  strong  enough  to  secure  the  enactment  of  a  law 
applying  the  cheaper  price  to  the  more  expensive  article, 
the  effect  will  be  to  drive  the  silk  merchant  out  of  busi¬ 
ness.  With  his  competition  removed  the  price  of  calico 
will  be  advanced  and,  in  the  end,  you  may  have  to  pay  silk 
prices  for  calico. 

The  moral  is  that  we  should  be  willing  to<  pay  for  what 
we  demand  in  transportation  as  well  as  anything  else. 
The  railroads  should  be,  and  generally  are,  willing  to  ren¬ 
der  good  service,  proportionate  to  the  population  and  its 
demands,  and  the  public  should  be  willing  to  pay  a  fair 
price  for  it.  If  this  doctrine  of  live  and  let  live  was  the 
universal  rule  of  conduct,  many  of  the  ills  from  which  we 
are  now  suffering  would  disappear. 

Statistics  show  that  the  manufacturers'  profit  runs  from 
15  to-  40  per  cent  and  that  the  average  profit  from  agri¬ 
culture  is  10  per  cent.  The  records  of  the  Interstate 
Commerce  Commission  reveal  the  interesting  fact  that 
during  1906,  the  last  year  for  which  these  figures  are 
available,  33  per  cent  of  American  railroad  securities  paid 
no  dividends  at  all,  while  the  average  dividend  rate  on 
the  remaining  two-thirds  was  6.03  per  cent,  which  is  an 
average  of  4  per  cent  on  all  outstanding  railroad  securi¬ 
ties.  How  many  manufacturers  would  continue  in  busi¬ 
ness  if  their  margin  of  profit  was  not  greater  than  that? 
In  this  connection,  it  may  be  well  to  state  that  in  the 
opinion  of  the  most  fairminded  experts,  the  railroad  sys¬ 
tems  of  the  country  as  a  whole  could  not  be  duplicated 
for  their  present  outstanding  securities,  so  that  whatever 


19 


the  conditions  may  have  been  in  the  past  the  average  re¬ 
turns  which  railroad  securities  may  earn  today  are  on  a 
fair  basis  of  values. 

Let  me  make  it  plain  to  you,  however,  that  what  I 
have  said  has  not  been  spoken  in  any  spirit  of  querulous¬ 
ness,  nor  of  retaliation,  I  have  simply  stated  a  few  facts 
with  the  idea  of  calling  your  attention  to  the  injustices 
and  dangers  of  railroad  operation  by  Commissions  and 
showing  you  where  this  tendency  will  lead  if  not  checked. 
We  are  all  in  the  same  boat.  Your  first  love  is  the  water¬ 
ways,  mine  is  the  railways,  but  our  interests  are  identical, 
and  we  will  finally  stand  or  fall  together.  You  desire  to 
raise  money  to  build  this  great  inland  harbor,  which  will 
serve  the  billions  of  people  who  will  come  and  go  on  this 
Continent  after  we  slumber  in  earth’s  bosom,  and  which 
will  prove  an  eternal  monument  to>  your  courage,  wisdom 
and  foresight,  and,  as  a  railroad  man,  I  wish  you  God¬ 
speed  in  your  efforts. 

We  desire  to<  raise  money  to  develop  a  system  of  inland 
highways  unparalleled  in  efficiency  and  cheapness  of  cost 
for  service  rendered  anywhere  on  earth,  to  serve  the  same 
great  mass  of:  humanity,  which  your  enterprise  will  serve, 
and  we  ask  your  aid  and  co-operation  in  our  efforts. 

I  do  not  believe  that  this  tendency  toward  operation  of 
railroads  by  Commission  which  now  threatens  is  deep- 
rooted  in  the  public  mind,  nor  do  I  have  any  fear  that  it 
will  long  remain  after  the  subject  is  thoroughly  studied 
and  understood.  The  man  with  a  worthy  cause  who  has 
pinned  his  faith  to  the  sound  common  sense  and  the  high 
moral  sense  of  the  American  people  has  never  in  the  end 
been  disappointed. 


20 


There  are  many  signs  that  our  people  are  beginning  to 
ask  themselves  what  is  the  matter  with  the  transportation 
situation  ?  Is  it  not  possible  we  have  gone  too  far  in  our 
efforts  to  correct  obvious  abuses?  Is  there  not  danger 
that  necessity  of  control  has  not  given  way  to  mere  love 
of  control?  Has  not  the  attempt  to  divorce  the  railroad 
business  from  economic  principles  begun  to  paralyze  the 
vital  nerve  of  progress?  Had  we  not  better  face  about 
and  get  back  to  sane  regulation,  which,  under  general 
laws,  will  leave  to  the  Railroad  Manager  a  free  field  and 
an  unfettered  hand  ?  All  these  are  hopeful  signs — and  so, 
when  the  facts  are  all  presented  and  the  arguments  are 
closed,  I,  for  one,  am  willing  without  fear  of  the  result 
to  leave  the  verdict  to  the  court  of  last  resort,  which  is 
located,  not  in  the  chambers  of  any  Commission,  or  in 
any  temple  of  justice,  but  which  is  lodged  in  the  minds 
and  hearts  of  the  90,000,000  of  people  who  constitute  the 
great  American  Republic. 


I 


3  0112  105337437 


